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Check out the current Compliance News Flash with blurbs about:

  • The continuing partial government shutdown;
  • E-Verify (still shutdown);
  • The Federal Trade Commission (also shutdown);
  • Government background investigations and the NBIB (not shutdown);
  • The California Consumer Protection Act; and
  • A recent merger in the background screening industry.

In honor of MLK Day tomorrow:

“Darkness cannot drive out darkness: only light can do that. Hate cannot drive out hate: only love can do that.” Martin Luther King

This week’s Compliance News Flash features information on New York City’s pay equity law, stats on FCRA litigation, personnel moves at the Federal Trade Commission, news about a Form I-9 scam, and information about my presentation on developing a compliant background screening at my firm’s upcoming Employment Law Seminar in Atlanta.

Click here to read my News Flash.

The Federal Trade Commission (FTC) recently announced reforms to its internal processes to streamline information requests and improve transparency in Commission investigations.  Quick tutorial — the FTC may issue Civil Investigative Demands (CIDs) pursuant to the FTC Act to investigate possible “unfair or deceptive acts or practices” against consumers.

Stemming from the work of the internal Working Groups on Agency Reform and Efficiency, the Bureau of Consumer Protection (BCP) identified best practices and announced reforms related to Civil Investigative Demands (CIDs), which the agency issues in consumer protection cases. The reforms include:

  • Providing plain language descriptions of the CID process and developing business education materials to help small businesses understand how to comply;
  • Adding more detailed descriptions of the scope and purpose of investigations to give companies a better understanding of the information the agency seeks;
  • Where appropriate, limiting the relevant time periods to minimize undue burden on companies;
  • Where appropriate, significantly reducing the length and complexity of CID instructions for providing electronically stored data; and
  • Where appropriate, increasing response times for CIDs (for example, often 21 days to 30 days for targets, and 14 days to 21 days for third parties) to improve the quality and timeliness of compliance by recipients.

In addition, BCP will adhere to its current practice of communicating with investigation targets concerning the status of investigations at least every six months after they comply with the CID.

For those who have been the subject of a CID this won’t take away the pain of having to respond, but moving forward it will help mitigate some of the pain for those subject to a CID.

I would like to congratulate a partner and colleague at my firm — Tom Pahl — who although he is leaving us, is leaving for a very good reason.  Federal Trade Commission (FTC) Acting Chairman Maureen Ohlhausen announced this week that she has appointed Tom Pahl, a partner at the Washington, D.C. law firm of Arnall Golden Gregory LLP, to be the Acting Director of the FTC’s Bureau of Consumer Protection.  This is a big deal!!  Tom replaces Jessica Rich who is leaving the FTC later this month.

To read the FTC’s press release click here.  To read more about Tom’s appointment click here, and here, and here.

Congratulations Tom!

The Federal Trade Commission (“FTC”) recently issued guidance applicable to background screening companies (aka consumer reporting agencies) who engage in tenant screening.  The FTC highlights four key responsibilities of background screening companies covered by the Fair Credit Reporting Act (“FCRA”), specifically:

  • “Follow reasonable procedures to ensure accuracy.
  • Get certifications from your clients.
  • Provide your clients with information about the FCRA.
  • Honor the rights of applicants and tenants.”

For background screening companies I encourage you to look at those responsibilities as described in the guidance carefully because the FTC opines on what “reasonable procedures to ensure accuracy” are and those should be read to apply to employment screening as well.  The FTC states, “[c]ertain practices may be indicators that a background screening company isn’t following reasonable procedures. For example, if a report lists criminal convictions for people other than the applicant or tenant – for instance, a person with a middle name or date of birth different from the applicant’s – that raises FCRA compliance concerns. Other examples that raise FCRA compliance concerns include screening reports with multiple entries for the same offense or that list criminal records that have been expunged or otherwise sealed.  Another indication that a company’s procedures might not be reasonable are reports that list housing court actions, but do not include the outcome of the action – for instance, that a case was resolved in the tenant’s favor.”

Background screeners–notice that the FTC calls out reports with multiple entries for the same offense, the reporting of expunged or sealed records, reports with no dispositions, and finally, the failure to use a middle name to ensure accuracy.

Yesterday I attended an interesting webinar regarding Fair Credit Reporting Act (FCRA) developments.  Susan Camp Stocks from the Consumer Financial Protection Bureau (CFPB) and Katherine Ripley White from the Federal Trade Commission (FTC) participated, along with my colleagues Bob Belair and Kevin Coy. The speakers covered a fair amount of ground on different FCRA issues, including the importance of furnishers of information having written policies and procedures.  However, I want to focus on what they said about the background screening industry.

FTC Comments

  • They are focusing on background screening and in particular the use of criminal history records in employment screening
  • Accuracy of the reports is essential
  • Red flags that background screeners should review/consider when reporting public records — different names or DOBs, multiple entries for the same offense, and the reporting of expunged cases
  • They are working with the Federal Interagency Reentry Council to address accuracy related issues in the criminal justice system
  • They will turn their attention to focus on tenant screening in the next year and it is likely that we will see revised guidance in this area

CFPB Comments

  • Among their policy priorities is consumer reporting
  • It appeared that there is a belief that there is weak oversight of public record providers and that they believe more audits of such providers should be conducted to address accuracy issues
  • Accuracy of the reports is very important to them and they spoke about the enforcement action against General Information Services and e-Backgroundchecks.com to illustrate the point

The Federal Trade Commission (FTC) just issued guidance for companies providing employment screening services.   According to the FTC, they have “created new guidance for businesses aimed at giving employment background screening companies information on how to comply with the Fair Credit Reporting Act (FCRA).” The FTC is referring to it as an “FCRA brochure” … I guess like a travel brochure you would pick up at a travel agency.  Anyhow, click here to view the FTC’s blog posting on this subject.

As a practitioner in this area I don’t see anything particularly ground breaking or earth shattering about the FTC’s publication.  I think this publication will be most helpful for newer participants in the background screening industry.

My main takeaways for seasoned background screening firms is that the guidance provides insight into potentially what the FTC considers most important.  FTC — if you are reading this, everything about you and the FCRA is important.  Key points for background screeners to focus on with respect to their compliance programs:

  • Accuracy of the reports — use your identifiers and check your identifiers on the reports (including middle initials); don’t provide reports with multiple entries for the same offense; and for crying out loud don’t report expunged or sealed records.
  • Know your customer before furnishing consumer reports and get your section 604(b) certifications.
  • Provide the appropriate federal notices to users and subjects of the reports.
  • Have consumer dispute procedures in place to appropriately respond to disputes or file requests, conduct reasonable reinvestigations and provide notices to consumers about the results of any reinvestigation.  And finally, don’t make it difficult or challenging for a consumer to request their file or dispute a report.
  • When reporting public records that are likely to have an adverse effect on the consumer’s ability to obtain employment, either provide consumers with notice or follow “strict procedures” as per section 613 of the FCRA.

Above points shouldn’t come as a surprise to seasoned background screening firms.  If they do, or you are not familiar with any of these points, speak with an FCRA attorney to come up to speed on these rapido (that’s Spanish for “fast”).

Section 613 of the Fair Credit Reporting Act (FCRA) requires that consumer reporting agencies (CRAs), when reporting a consumer report for employment purposes which contains public record information, which are likely have an adverse effect upon a consumer’s ability to obtain employment, must either follow strict procedures or send notice to the consumer.  Both the law, and the Federal Trade Commission (FTC), are clear that CRAs can select either option and are not required to follow both 613(a)(1) and 613(a)(2).  But the ridiculous amount of FCRA-related litigation has CRAs wondering…should I do both?  I’m not legally required to do both, but should I have both strict procedures in place and send notice to cover all my bases from a litigation perspective?  While this blog posting is not intended to offer legal advice, I am happy to discuss this broader issue with CRAs offline.  For purposes of this blog, I will leave you with this nugget.

The FCRA does not define “at the time”, which is part of the notice provision of section 613(a)(1).  The full section reads, “at the time such public record information is reported to the user of such consumer report, notify the consumer of the fact that public record information is being reported by the consumer reporting agency, together with the name and address of the person to whom such information is being reported;”.  A recent district court opinion in the rocket docket, the 4th Circuit, provides a very generous reading of the notice provision.  The case, Rodriguez v. Equifax Information Services, LLC (1:14-cv-01142) (E.D. Va., July 17, 2015), involves an employee who applied for a position with the Office of Personnel Management (OPM).  Two relevant facts — the plaintiff’s security clearance was approved and he never actually received the notice.   However, essentially held that Equifax Information Services had an appropriate process in place to provide notice to consumers.  The process included sending notices by mail the following business day (and in some instances two business days later), after the report had been provided to OPM.

Key takeaways from the Court’s Memorandum Opinion (“Opinion”):

  1. The Court states that the “at the time” requirement is ambiguous (which is true) and there is “more than one reasonable interpretation of what that requirement means.” (Opinion, p. 9)
  2. The Court states that “Congress did not impose a ‘same time’ requirement with respect to the receipt of the notice; and in 2000, the Federal Trade Commission interpreted the ‘at the time’ requirement to permit the mailing” of such a notice. (Opinion, p. 9)  This we already know and more specifically what the FTC says is, “A CRA may use first class mail or other reasonable means to notify consumers that it is providing public record information for employment purposes under subsection (a)(1).” (See, 40 Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report with Summary of Interpretations, p. 81).
  3. This takeaway is very helpful for CRAs using the notice option of section 613.  The Court does not require parity with the method by which the notice is sent.  Meaning, a CRA can send the notice by automated/electronic means to the employer and by mail to the consumer. The Court states that they “cannot conclude that the text of the statute requires such technological symmetry during periods of technological innovation so long as the system initiated, at the same time a report to OPM was initiated, a process that was designed to deliver notice to the consumer according to a reasonable, standard and accepted method of delivery.” (Opinion, p. 9)